In other words, nothing that you believe you will receive upon death of a loved one actually belongs to you until, of course, it does.  This is important to recognize because you are not, actually entitled to the inheritance you expect at any point before the death.  Wills may be changed, trusts may be amended or revoked, and beneficiary listings may be updated at any time and without your knowledge.  In fact, I make a living making such changes; they are frequent and varied.

That said, often people believe they will be receiving something from the deceased person because they were told they would.  Perhaps after years of being the go-to person for physician visit transportation and grocery shopping your ailing aunt promised you a share of her estate.  Maybe, as an only child, you simply assumed you would be the only beneficiary.  Whatever the situation, if you later find that you are not, in fact, the beneficiary, there are a number of potential claims you could make.
In the event that a will or trust was changed to make a lawyer or caretaker a beneficiary of the estate, or even an executor or trustee, you may be able to make a claim for undue influence.  Lawyers and caretakers owe fiduciary duties to their clients, i.e., it is their job to put their clients’ interests first.  Occasionally, opportunistic professionals will use their position in order to obtain an inheritance for themselves.  It is possible that there is a subtle, slow progression such that the professional is unaware he (or she) is exerting his influence.  The courts are aware that clients are generally in a uniquely vulnerable state when dealing with caretakers and lawyers and will assume undue influence is present under certain circumstances.  A successful claim will result in the offending beneficiary being removed as executor, trustee or beneficiary.

Another common issue is that, when faced with one’s own mortality, people often engage in a flurry of estate planning.  A person who has not even reviewed their trust in 20 years might suddenly amend it 20 times.  Especially when such planning occurs shortly before death, there may be issues of mental capacity. A client does not have to be “all there” to create a will.  The client does need a clear understanding of his relations, his property, and the concept and gravity of testamentary decisions.  To create or amend a trust, a client requires somewhat more mental capacity.  However, a client who no longer recognizes certain family members, or is manipulated into signing a document may not have had the mindset necessary to create their estate plan.

But, beware.  No contest clauses are intended to prevent potential beneficiaries from circumventing the testator (i.e. will-maker) or settlor’s wishes.  An unsuccessful challenge could cost you your entire share of the estate.  Before attempting to challenge a will or trust, you should consult with a qualified attorney to determine whether the challenge will be worth the risk!

Estate Planning: The Price of Organization, Rewards, Gifts, and Wondrous Tax Things…
FREE REPORT:  This complimentary report, focused on Estate Planning, is comprised of many of Mr. Miller’s articles from his long running column for the largest regional newspaper in San Diego County. This report will guide you through the questions surrounding getting your estate planning in order.

Although perhaps not as fictional as it once was, the idea of the fertile octogenarian conjures up another important point: people are living longer.  At some point, it was considered rare to reach the age of eighty.  Now, it is practically considered life expectancy.  With increased age comes a number of important considerations.
Generally, we talk about “end of life care,” which includes planning for health concerns that will require levels up to skilled nursing.  Because end of life care has the potential to deplete the estates of most people to nothing, we encourage planning for this expensive form of care.  Medi-Cal planning might include a QMap Trust, gifting, or irrevocable trusts in order to meet the qualifications without depriving your heirs.  Similarly, planning for the VA Aid & Attendance Non Service Connected Disability benefits through QVap Trusts and other strategies is helpful in the event you require nursing care.  Finally, long-term care insurance may provide a solution to paying the high costs of healthcare.

That said, we hardly ever talk about planning to be the fertile octogenarian.  Effective estate planning is about striking the balance between both scenarios.  It is important to remember that even if you are ill, you could become well and live far into your later years.  Although the following anecdote has been changed slightly to protect the confidentiality of the client, recently, a man came into my office concerned about his long-term girlfriend.

He was a widower in his late middle-age and the couple decided that getting married would simply complicate their lives since they each had children from different marriages.  Several years later, he suffered some serious health problems.  He owned two houses, his primary residence and a rental that he wanted to give to her.  When he was hospitalized and told to basically say his goodbyes and be sure his affairs were in order, they put the houses in joint tenancy and he gave much of his money away.

Fortunately, he got better.  Now, it is nearly 5 years later, he is in his eighties, and his girlfriend has lost her capacity and has had a stroke.  His most ardent concern is that she receives good health care and comfort in the end of her life.  Unfortunately, he gave away most of his assets and he can’t sell or mortgage either house in order to gain some cash without going to court.  Because of their preconceived notion that he would die first while she was healthy, he impoverished himself without proper estate planning.  Once he pulled through, they still did not plan for financial powers of attorney, a trust, or similar documents that could allow their assets to flow between them as necessary.  Now he is looking forward to many healthy years, the majority of his assets are in limbo.

Hopefully, this story will remind you that you never know if you will become ill, stay well, die suddenly, or require care.  It is important to take a balanced approach to your estate plan in order to ensure that you are protected in all instances.

And, in case you are wondering what to spend your money on if you are lucky enough to be healthy in your old age, consider this story about the parasailing 100 year old lady.
Or this one about how wrong one can be.

Estate Planning: The Price of Organization, Rewards, Gifts, and Wondrous Tax Things…
FREE REPORT:  This complimentary report, focused on Estate Planning, is comprised of many of Mr. Miller’s articles from his long running column for the largest regional newspaper in San Diego County. This report will guide you through the questions surrounding getting your estate planning in order.

For an IPO that is economically the size of a small country, the potential for a whole slew of new, young millionaires is largely unknown.  Reportedly, people who have completed small tasks for the company occasionally accepted stock instead of payment.  For the founders, we are looking at billionaires.  The estate tax exemption in 2012 is $5.12 million with a top marginal tax rate of 35%.  Accordingly, the estate tax on a $20 million estate approaches $5.2 million.  Next year, the estate tax exemption is scheduled to drop back down to $1 million with a top marginal tax rate of 55%.  This means the estate tax on the same $20 million could approach over $10 million.  With much larger estates, the incentive to avoid the estate tax is huge. The strategies employed by billionaires, however, are often similarly useful for those of you who have estates large enough to be subject to the estate tax.

The basic benefits of an A-B Trust or an A-B-C Trust can decrease the overall estate tax that will be due by doubling the exemption amount and deferring the estate tax until the second spouse’s death.  However, the role of charitable giving, life insurance, and more advanced estate planning techniques is pronounced in large estates.  For example, charitable gifts are free from estate tax, but certain planning techniques such as charitable remainder trusts, can allow you to retain some of the benefit of the assets transferred during your life.  The more you are willing to give away to charity on your death, the more effective this type of plan will be.

Additionally, grantor retained annuity trusts (“GRATs”) allow estate tax savings, while retaining some interest in the assets and being able to transfer the assets to family members.  According to the Wall Street Journal, it is suspected that many of Facebook’s heavy hitters have used GRATs because they are especially valuable if you have assets you believe will appreciate in value over time.  The value of the gift(s) within the GRAT is determined when the asset is first transferred rather than at date of death.  If the estate tax exemption decreases to $1 million at the end of this year, these two types of trusts (A-B Trust and Grats) may be extremely useful to anyone with more than a few million dollars in their estate.

For most Californians, these estate planning techniques are not needed, at least while the estate tax exemption is so high.  So why should you care about Facebook’s IPO?  Facebook is located in the state of California and the state expects approximately $2 billion in tax revenue to be directly related to the IPO.  Given that the proposed budget just released by Governor Jerry Brown is $91 billion, this large amount of money could protect some state benefits.  Although the budget is currently assuming $1.5 billion in tax revenue, higher than anticipated earnings could cover some of the Governor’s proposed cuts, such as $1.2 billion in Medi-Cal spending.  At a time when the courts seem to be on Medi-Cal beneficiaries’ side, it would make sense to avoid excess cuts.

Advanced estate planning techniques may be used for Medi-Cal purposes as well; a QMap trust could reduce the income tax implications of selling a house while receiving Medi-Cal payments.  Additionally, proper planning could help avoid claims by Medi-Cal for reimbursement from your estate.

No matter the size of your estate, it is important to plan ahead.  Who knows?  You could be the next Zuckerberg.

Estate Planning: The Price of Organization, Rewards, Gifts, and Wondrous Tax Things…
FREE REPORT:  This complimentary report, focused on Estate Planning, is comprised of many of Mr. Miller’s articles from his long running column for the largest regional newspaper in San Diego County. This report will guide you through the questions surrounding getting your estate planning in order.

I generally try to reserve comment on such sensitive political topics because, ultimately, my political position is irrelevant to how I create effective estate plans for a variety of clients.  So, you are probably wondering why I am bringing it up at all.  As you may already be aware, the federal government took a stand on this issue during the Bush Administration with the Defense of Marriage Act (DOMA).  Among other things, DOMA defines a marriage as between a man and a woman which means anywhere the word “spouse” is written in federal law, same-sex “partners” are not included.  Because the VA Aid & Attendance benefit is a federal benefit, the extension of these benefits is not applied to same-sex partners.

In the outpouring of recent news about who feels how about the issue, the Marine Corps Times quietly released an article saying that the federal government will no longer use DOMA as a means of denying benefits to same-sex spouses.  The announcement arose in the context of a woman who requested increased disability benefits based on her marriage to another woman.

In the instant case, the couple is married in Connecticut, where same sex couples are allowed full marriages.  It remains to be seen whether domestic partnerships, civil unions, or similar relationships will be suitable to qualify for increased VA benefits.  Of course, this is a natural development from the repeal of Don’t Ask, Don’t Tell (DADT), another controversial policy created during the Clinton Administration.  Prior to the repeal of DADT, homosexuals were not allowed to serve openly in the military in the first place, let alone attempt to qualify their partners for VA benefits.

Spousal benefits from the VA can be significant to both the veteran and the spouse.  For example, a married veteran can collect $2,020 per month for Aid & Attendance benefits compared with $1,704 per month for a single veteran.  Additionally, in the event that the surviving spouse requires Aid & Attendance benefits, the spouse may collect up to $1,094 per month.  Similarly, other pension benefits and survivor benefits are presumably available to both same-sex married couples and registered domestic partners in California.

Because this area of law is “evolving,” we will have to continue to keep a close eye on how the policy plays out, particularly with respect to same sex couples who are not “married.”

VA Aid & Attendance–How Can I Correctly Choose Help for my Application Process?  FREE REPORT:  This complimentary report focuses on the various kinds of people one can consult when applying for the Veterans Aid & Attendance benefit. Who one chooses can mean the difference between success and failure. Remember, if you are denied, you may not be able to reapply for up to a year or longer. Download our complimentary report for a behind the scenes look at the different types of people you can consult and the dirty underbelly of the veterans aid & attendance industry.

The good news is the large number of claims did actually get the attention of several major news outlets and, consequently, the powers that be in Washington.  Along with other reforms, the V.A. promised to go to a paperless system, which should save time, money, and perhaps even some bureaucracy, in 16 offices by this September and 56 offices by the end of next year.

This week, the V.A. announced that it has hired Harris Corporation to handle the implementation of a paperless system designed to reduce errors and speed up the claims process.  Harris is no stranger to government bureaucracy; it currently manages the U.S. Navy Marine Corps Intranet among handling radio and satellite networks, and other large projects that require the ability to handle a lot of information efficiently.  The implementation will take time, but there is hopefully light at the end of the tunnel for those anticipating filing a claim for benefits.

The V.A.’s ordeal brings home the need to plan ahead.  The more you are prepared for your future needs financially and medically, the better prepared you will be for filing for your benefits.  It is best to get advice on your eligibility and the claims process as early as you can.  In many ways, filing your paperwork for benefits is the last step; veterans who are waiting months for their benefits also needed the advance time to prepare all their documents.

Sometimes, asset planning is vital to approval of certain benefits, such as the VA Aid & Attendance Non Service Connected Pension Benefit, which are available to qualified veterans that need help with their medical expenses.  The QVap Trust is one of the best ways to help you qualify for Aid & Attendance and save on income taxes.
Additionally, I cannot stress enough the importance of hiring someone familiar with the V.A. and its requirements to handle your benefit claim.  Admiral Hyman Rickover once said “If you are going to sin, sin against God, not the bureaucracy. God will forgive you but the bureaucracy won’t.”  Filing incorrect or incomplete paperwork can exacerbate the already long delays in claim processing.

VA Aid & Attendance–How Can I Correctly Choose Help for my Application Process?  FREE REPORT:  This complimentary report focuses on the various kinds of people one can consult when applying for the Veterans Aid & Attendance benefit. Who one chooses can mean the difference between success and failure. Remember, if you are denied, you may not be able to reapply for up to a year or longer. Download our complimentary report for a behind the scenes look at the different types of people you can consult and the dirty underbelly of the veterans aid & attendance industry.

There are various approaches.  The most simple of the documents is called a Medical Directive or Living Will.  One approach is that you direct that if two physicians have determined that you will require heroic efforts to survive (artificial nutrition, hydration, etc.), and you are unlikely to survive or get better, they can decide not to save you.  A few cautions about your medical directive: 1. The physicians have to be aware of this power so someone must give them the directive, and 2. The physicians have to be willing to make such a decision.  Verifying their willingness to do so (some say it is a violation of their Hippocratic Oath), is key to this document.  Otherwise, you may not even want it.

The most commonly used document is the Advance Health Care Directive.  This form allows you to designate specific people who you trust to make your medical decisions in the event you are unable to do so.  Additionally, in this document you may make your treatment preferences known and the values or beliefs you wish to guide your agent’s decision.  This document can be super complex or super simple.  The complex can involve a method by which you may make your treatment preferences known and the values or beliefs you wish to guide your agent’s decision.  Amongst other approaches, this can be accomplished by a questionnaire, which contains questions and check boxes with pre-written answers.  However, you should be aware that you are free to change any response, decline to include certain sections or provisions, and make additional specifications.

Ultimately, it is up to you how broad or how specific you want your agent’s power to be.  Although the Advance Health Care Directive is generally viewed as a one-size-fits-all form, and indeed it may be easier to interpret when it follows a particular format, it is your opportunity to speak about the way you want difficult decisions made.  If you are fundamentally opposed to, say, the amputation of certain limbs, or religiously opposed to invasive procedures or blood transfusions, you should not be reticent to say so.  Similarly, if you want all necessary pain relief regardless of what it will mean, even if it may hasten your death, this is your time to state it.

Because creating your trust will often be the most complex task your attorney performs when creating your estate plan, it is invariably what you will spend the most time discussing.  Additionally, when you come in for regular trust reviews , you will often spend the majority of your time discussing changes to the distribution provisions of your trust.  However, your healthcare preferences will undoubtedly change as you age.  When you have young children, you are much more likely to want physicians to do everything they can to save your life.  When you are older, chronically ill, and terminally uncomfortable, you may change your mind toward a preference to die peacefully and with dignity.
It is literally your life we are talking about.  Take control of it.

Estate Planning: The Price of Organization, Rewards, Gifts, and Wondrous Tax Things…
FREE REPORT:  This complimentary report, focused on Estate Planning, is comprised of many of Mr. Miller’s articles from his long running column for the largest regional newspaper in San Diego County. This report will guide you through the questions surrounding getting your estate planning in order.

If you have a pet who is near and dear to you, especially if that pet will very likely outlive you (such as a parrot), you should include provisions for your pet as part of your comprehensive estate plan.  Unfortunately, you cannot require anyone to take property they do not want and, unlike children, it is very difficult to sue when they are not properly cared for.  For these reasons, even if you do not dress your pooch in sweaters during the winter, you should treat their care with the same amount of thought as you would for children.

First, carefully consider who you would like to care for your pet.  You should choose someone who doesn’t just like animals, but who likes your animal.  Additionally, it is best if their pets are either used to your pet, fairly non-territorial, or if the person you are choosing does not already have pets.  Doing so will ensure that your pet is happy in its new home.  Although it is tempting to choose someone in your family, it may be worthwhile to consider other trusted friends and neighbors.

Secondly, you should ensure that the person you choose is willing to take care of your pet for the long term.  As I said, you cannot force anyone to take property they do not want.  Additionally, pet are expensive, increasingly so as they get older.  The person you choose may not have the same affection toward your pet that you do, especially right away.  If your pet is burdensome, they may not want to adopt it.  It is worthwhile to verify that this person is still willing to care for your pet every few years, especially if they have children or adopt a new pet of their own.

Thirdly, you might consider setting aside some money for the care of your pet, as you would for the care of your children.  Often, as your pet gets older, health and dental problems will be financially burdensome.  You may provide an outright distribution to the caretaker of your pet.  Alternatively, California law provides for trusts in favor of pet-beneficiaries.  A trust will allow you to name Successor Trustees and place limits on the trust distributions.  (Cal Prob. C. 15212)

Finally, if your attempts at finding a caretaker for your pet have failed and you cannot find a person you can trust to care for your pet instead of simply taking the money you have set aside, you could consider a shelter.  The biggest advantages to a shelter are that you can be fairly certain that it won’t change its mind and that it will be around long after you are.  Visiting shelters and speaking with a person about the types of programs they have in place for the care of pets once their owners are deceased is a good way to ensure that your animal will be properly cared for.

Whatever you decide to do, remembering your pet in your estate plan is a good way to thank it for the years of companionship it provides.  Whether it is the dog that greets you at the front door, the cat that sits by you when she feels like it, or the bird you’ve trained to say “hello,” it will appreciate the thought.

Estate Planning: The Price of Organization, Rewards, Gifts, and Wondrous Tax Things…
FREE REPORT:  This complimentary report, focused on Estate Planning, is comprised of many of Mr. Miller’s articles from his long running column for the largest regional newspaper in San Diego County. This report will guide you through the questions surrounding getting your estate planning in order.

One frequently overlooked aspect of retirement plans is the beneficiary listing.  Your IRA is generally not a part of your trust or general estate plan, but it is part of your comprehensive estate plan.  It passes without probate to the beneficiary listed on your forms.  Keeping track of who is listed as your beneficiary and your contingent beneficiary is just as high a priority as keeping the distribution provisions of your trust up to date.  Failure to verify your beneficiary listing could result in one of your largest assets transferring to someone to whom you do not want the account to go, such as a former spouse or a person who has predeceased you.  It is also not uncommon for financial institutions to lose the beneficiary listing.

Additionally, making sure that your beneficiary is an individual and, if there are multiple beneficiaries you have specified percentages equaling 100% will allow the beneficiaries to have a stretch IRA, which can result in significant tax savings.  You should consult with your tax advisor about the advantages of stretch IRAs.

Your IRA is also basically a restricted bank account.  However, even though its use is restricted, it is not necessarily inaccessible.  There are plenty of reasons to treat withdrawing from an IRA as a last resort, most notably of which is that you want to save it for the future.  However, if you need to withdraw money early from an IRA, you should make sure you use it for one of the penalty-free purposes allowed by Congress including college expenses, deductible medical expenses, or putting a down payment on a house.  Again, you should make sure you have spoken with your tax advisor before you withdraw the funds.  There are certain qualifications and rules in order for your withdrawal to be penalty-free.  Making sure you follow the necessary formalities can save thousands in tax penalties.  It is also extremely important to remember to take required minimum distributions (RMD) beginning with the year you turn 70 ½ years old.  Your financial institution should be able to calculate your RMD for you.

Although we spend the majority of our time working with assets that are subject to probate, I don’t want you to overlook the importance of your IRA in your estate plan.  By being proactive enough to create an estate plan, it’s obvious that preserving your financial future is important to you and for your family.  Additionally, you have to work hard in order to amass your estate and retirement plan.  Staying on top of your IRA can save your heirs headaches in the future and preserve the majority of the account, which is one of the top goals in estate planning.  Alternatively, overlooking these common IRA pitfalls can result in the ultimate beneficiary of your labor being the U.S. Department of Treasury.

Estate Planning: The Price of Organization, Rewards, Gifts, and Wondrous Tax Things…
FREE REPORT:  This complimentary report, focused on Estate Planning, is comprised of many of Mr. Miller’s articles from his long running column for the largest regional newspaper in San Diego County. This report will guide you through the questions surrounding getting your estate planning in order.

When you purchase a piece of real property, the very next stop you make after your realtor’s office is your attorney’s office.  If you have not already created a revocable living trust, you should do that first in order to create California’s most effective vehicle to avoid probate.  Discussing your estate planning concerns with your attorney can help the attorney recommend the right type of trust for you, whether that is a standard trust, a QVap, or a QMap trust.  Then, you should fund it with that recently purchased property.  This means taking the deed you feel like you just signed your life away for and replacing it with a new one.

When you refinance your mortgage or take out a line of credit, lenders often require you to transfer the property out of trust.  Often, the lender will graciously complete this task for you as part of their service; you may not even realize that it is among the many refinance documents you are signing!  If you are unsure whether your lender transferred your property out of trust, you should verify the title of your property with your attorney at your next trust update appointment.  Lenders sometimes, but not always, transfer property back into the trust once they are done, which could negate all the efforts you have put into your estate plan ahead of time.

When you inherit real property, you should contact your attorney and ask him to put it in your trust as quickly as possible.  If you are the Executor or Trustee of the estate and also a beneficiary of that estate, you must transfer the house to yourself and…?  You guessed it! Put it in your own trust (and make sure you complete the proper paperwork to take advantage of Prop 13, if applicable)!

You have probably been told over and over to put your house in your trust, but there are other types of real property you may not have considered.  If you own timeshares in California or elsewhere, you have a deed to that property.  Although its value may be small, it is best to ensure that it is part of your estate plan and, especially if you own a lot, it is in trust.

Additionally, property held in other states could cause what is called an “ancillary probate.”  Essentially, this means that a probate proceeding may need to be initiated in the other state in which you own real property.  Not only does an ancillary probate add to the complexity of administering your estate, it will cause innumerable additional headaches for your heirs who will need to find an attorney, determine the level of involvement required in that state, and wait for that proceeding to be completed.

Finally, many people in California own oil, mineral, and hydrocarbon rights in the state of California or other states.  Especially when the rights produce royalties, they can be extremely valuable.  Getting the deed granting you the rights to the royalty interest and underlying property is a much easier task to complete during the estate planning period rather than during administration.

In sum, if you have a deed, you should make sure that it says your name as Trustee of your trust.  If it does not, take the time to transfer now while you can!

Estate Planning: The Price of Organization, Rewards, Gifts, and Wondrous Tax Things…
FREE REPORT:  This complimentary report, focused on Estate Planning, is comprised of many of Mr. Miller’s articles from his long running column for the largest regional newspaper in San Diego County. This report will guide you through the questions surrounding getting your estate planning in order.

There are other aspects to the healthcare system that contribute to the increasing costs.  One large aspect is bureaucracy.  There is a perception that individuals have the ability to comprehend, manage, and make choices about their own care.  However, as stories like this show, we are ill-equipped to make ourselves savvy consumers. 

The whole idea behind a market is that consumers will choose among businesses competing for the consumers’ money.  However, in the healthcare market, consumers have a number of issues that prevent their decision-making process from being effective.  For one thing, sometimes the consumer-patient is not even conscious to make a decision.  Even if they are, no one gives them an idea of what things will cost, who is going to charge it, or what they should expect.  As a result, patients who are hospitalized for any amount of time will often receive a mountain of medical bills from each individual physician, the hospital itself, and sometimes different wings within the hospital.

To make matters worse, even if the patient was informed of the costs involved, it would consist entirely of hypothetical pricing.  The hospital bills differently depending on who will actually pay the bill.  Insurance companies generally pay significantly less than uninsured patients.  With the increased reliance many young healthcare consumers are placing on high-deductible plans and Health Savings Accounts, simply understanding the bureaucracy behind medical billing could be the first step toward driving down costs.
Ironically, for more elderly clients, the lack of a market may have been driving up costs.  Medicare has historically used a fee-for-service system.  However, over the course of the last year the government conducted an experiment to determine whether competitive bidding would save taxpayer money.  It did.  In fact, competitive bidding cut costs by 42% for medical equipment such as oxygen equipment and wheelchairs.  Because of the cost-sharing method between Medicare and patients, individuals also share in the savings.
If the experiment holds true as it is expanded throughout the country (intended for 2016), introducing the market to Medicare may save beneficiaries significant amounts of money each year, while also saving taxpayers.  Ensuring that you will qualify for Medicare when you need it should be part of your comprehensive estate plan.  You should also consider whether you qualify for V.A. Aid & Attendance benefits and whether a QMap  or QVap trust might be right for you and your family.

VA Aid & Attendance–How Can I Correctly Choose Help for my Application Process?  FREE REPORT:  This complimentary report focuses on the various kinds of people one can consult when applying for the Veterans Aid & Attendance benefit. Who one chooses can mean the difference between success and failure. Remember, if you are denied, you may not be able to reapply for up to a year or longer. Download our complimentary report for a behind the scenes look at the different types of people you can consult and the dirty underbelly of the veterans aid & attendance industry.